Transcript Insurance Specialty Construction Group

Insurance Specialty Group LLC
Asset Protection Program (“APP”)
for General Contractors
4501 Circle 75 Parkway, Suite F6200 | Atlanta, GA | (678) 742 6300
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Overview of the
Asset Protection Program
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Asset Protection Program
• Insurance Specialty Group, formed in 1998, has underwritten
over $700 million of CGL and Builders premiums for
residential general contractors
• Insurance Specialty Group LLC (“ISG”) is a MGA
underwriting residential contractors on behalf of:
– AmTrust Financial Group (A : XII) for CGL (AmTrust has
Shareholder Equity of over $1.1 billion)
– AXIS Insurance Company (A+ XV) for Builders Risk.
• The CGL policies are either admitted (Wesco Insurance
Company) or non-admitted (AmTrust Int’l Underwriters Ltd)
• ISG underwrites builders from 10 annual homes to over
2,000 +.
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Asset Protection Program
• The APP combines the risk management of a Structural
Home Warranty or 3rd Party Peer Review, strong sales
and subcontractor agreements with broad form CGL and
Builders Risk insurance
• ISG’s inception to date CGL ultimate loss ratio is 45%
proving the APP’s risk management and loss control
features protect the builder against frivolous construction
defect losses
• ISG’s inception to date Builders Risk loss ratio is less
than 35%
• These favorable loss ratios allow ISG to offer creative
and competitive terms and conditions
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Asset Protection Program
• The APP can provide comprehensive CGL and
Builders Risk Insurance for the following types of
construction subject to a maximum $20 million
value per foundation:
– Single Family
– Multi-family - fee simple or condo
– Mixed Use – commercial on 1st floor and
residential above
– Small Commercial
– Apartments
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The Asset Protection Program
Features and Benefits of APP
• Written warranty contract between builder and purchaser
defines the builders construction defect obligations
• Homebuyer accepts warranty in lieu of implied warranty
laws which are very dangerous
• Maintains insured's construction defect liabilities in
contract law vs. tort law (litigation)
• Builder conciliation/arbitration for 10 years
• 3rd Party Peer Review
• Proven Sales and Subcontractor agreements provided to
insured
• Insured Structural Defect coverage either through the
Warranty (first dollar) or the CGL policy subject to CGL
deductible
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Review of Insurance Products
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Insurance Product Overview
• General Liability:
– Annual Practice Policies: Admitted & Non-Admitted
– Project-Specific Policies: Issued with Extended P/CO.
– Project/WRAP Policies: Issued with Extended P/CO.
• Builders Risk:
– Standard & Modified Blanket
– New Starts Reporting
– Single-shot
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CGL Coverage Limits Available
• Bodily Injury & Property Damage Liability – Up to $5
million per occurrence, $5 million general aggregate,
$5million products completed operations aggregate
• Personal Advertising Injury Liability - $5 million per
occurrence, $5 million general aggregate
• Medical Expenses - $5,000 any one person
• SIR’s from 10,000 to $1 million for larger builders are
available
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APP General Liability
Annual Practice Policy: Admitted & Non-Admitted:
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12-Month Policy Term
Competitive rates
ISO Coverage form with ISO-based endorsements
No endorsed coverage limitations related to construction
defect coverage or work preformed by a subcontractor
• Warranty requirement – Various options available
• No endorsed exclusions for uninsured/underinsured
subcontractors
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APP General Liability
Project-Specific & WRAP Policies: Non-Admitted
• Designated coverage locations, typically used for
construction projects with more than three homes within a
single location. Multiple projects may be scheduled to a
single policy.
• 12 to 36 month Policy Term
• Endorsement providing construction defect coverage for
homes sold during policy term for 10 years or the
applicable Statue of Limitation, whichever is less.
• Warranty requirement – Various options available
• Available with a Pay-As-You-Sell Policy Structure
Advantage of Project Policies: A single policy covers premise liability for
the policy term and construction defect exposure up to ten years. Renewal coverage
is not required for continued projection to the builders and other named insured.
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APP CGL Forms
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Use of CG 00 01 04-13
Blanket Additional Insured's – Premise only
Subcontractors Endorsement – Charge premium
Exclusion - Exterior Insulation and Finish System
Increase in SIR for homes sold without Approved
Warranty
Defense inside limits for projects and wrap
Cross Suits Exclusions
Use of Designated Work Exclusion – Define policy
Punitive Damage Limitation
Continuous & Progressive Exclusion - Practice Policies
High Minimum earned on non admitted
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Builders Risk Coverage
Standard & Modified Blanket Policy Structures
• No reporting of New Starts
• Deposit paid at inception based on forecasted New Starts
and current Existing Inventory
• Audit completed at policy expiration
• Provides Wind Coverage
• Maximum limits of $1.5M per structure & $5M per occ.
• Modified Blanket Policy Structure:
– Deposit premium for New Starts is pro-rated based upon average
amount of months each structure requires coverage
– Audited premium for New Starts & Existing Inventory is calculated
on a pro-rata basis, based on number of months covered.
– Significant reduction in annual premium due to proration of premium
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Builders Risk Coverage
New-Starts Reporting Policy Structure
• Provides 12-months of coverage for each home
reported, starting from the date in which materials are
dropped on the site
• Admitted in most states
• Available in Florida
• Provides Wind Coverage
• Monthly Reporting of New Starts
• Broad Coverage
• Competitive Rates
• Able to write coastal exposure
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Review of Risk Management and
Loss Control
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The Asset Protection Program
Risk Management
• ISG works with the agent/builder to design and
implement the following risk management tools:
• Written Warranty Contract
• Sales and Purchase Agreement
• Subcontractor Agreements
• Subcontractor insurance
• Additional insured endorsements
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The Asset Protection Program
Loss Control Reviews
• Confirm use of approved Sales and Subcontractor
Agreements
• Compliance with ISG’s Subcontractor Endorsement
• Certificate review
• Use of Quality Control Checklists
• Initial evaluation (including a jobsite visit) – any
project/contractor with $50,000 or greater in total premium.
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Review of Warranty Products
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Warranty Products
• HBW is the leading provider of new home structural
warranties in the country
• The HBW warranty offers the broadest warranty protection
to the home builder and is fair to the homeowner
• The HBW warranty defines the builders legal liability of the
residential contractor to the homeowner:
– One Year Workmanship – (Surety)
– Two Years of Systems – HVAC, Electrical, Plumbing
(Surety)
– Ten Years of Framing and Foundation – ( Fully Insured)
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Warranty Products
• HBW has over 50 Sales Representatives throughout the
country.
• Agent is responsible for embracing and discussing with the
builder the risk management features of the warranty.
• The HBW Sales Rep is responsible for selling and servicing
the warranty.
• HBW Sales Reps are available to make joint calls to the
builder either before or during the presentation of the CGL
quote.
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Approved Warranty Products
• Full 2-10 Warranty
– Surety Coverage for 1-year workmanship & 2 year systems
– Full risk transfer for Framing and Foundation Structural Coverage for
10 years
• 10-Year Structural-Only Warranty
– Full risk transfer for Framing and Foundation Structural Coverage for
10 years
• Builder Backed Warranty
– Uninsured and cannot be used for homes over $1M in total value or
homes located in CO, TX and MS)*
– Coverage for framing and foundation construction defects normally
insured by the warranty may be insured by the APP CGL policy;
subject to policy terms and conditions
– Typically used on new business only.
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State Availability
Admitted and Non Admitted
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State Availability
– CGL Admitted Product Offered in AL, AZ,
FL, GA, KS, MO, NM, OR, UT & WA.
– CGL Non-Admitted Product Offered in all
states except NY, HI, AK and NV
– Builders Risk Offered in AL, AZ, CA, CO, FL,
GA, IL, IN, KS, LA, MD, MI, MN, MS, MO, NJ,
NM, NC, NV, OH, OR, PA, SC, TN, TX, UT,
VA, WA
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Conclusion
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Conclusion
• APP offers the comprehensive protection against
construction defect claims and litigation
• Under the APP, the homebuilders legal construction
defect obligations are captured in a contract (contract
law) versus tort law.
• The residential homebuilder is protected against costly
construction defect litigation by conciliation and the
Federal Arbitration Act.
• APP provides tested sales and subcontractor
agreements
• APP provides broad and competitive CGL and Builders
Risk insurance
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Contact Information
Underwriters:
Liz Davis – WA, AZ, UT, NM & S. CA
[email protected] – (678) 742-6314
Stephen Harrell – Eastern US, KS, MO, FL, GA & N. CA
[email protected] – (678) 742-6336
Bruce Harrell – [email protected] (678) 742- 6313
www.insurancespecialtygroup.com
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